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Twitter beat analysts’ expectations for both revenue and earnings per share in its third quarter, but the company confirmed Thursday that it plans to lay off 9% of its workforce while looking to cut costs and work toward profitability in 2017.
The company posted revenue of $616 million in revenue, an 8% lift year-over-year, and an adjusted profit of $0.13 a share in the three months that ended September 30.
The platform’s monthly active users grew 3% year-on-year to 317 million – up 4 million from last quarter.
But despite these gains, Twitter continues to be a loss-making company. It posted a GAAP net loss of $103 million, or $0.15 a share.
Jack Dorsey, Twitter’s CEO, said in the earnings release: “Our strategy is directly driving growth in audience and engagement, with acceleration in year-over-year growth for daily active usage, tweet impressions, and time spent for the second consecutive quarter.”
He continued: “We see a significant opportunity to increase growth as we continue to improve the core service. We have a clear plan, and we’re making the necessary changes to ensure Twitter is positioned for long-term growth. The key drivers of future revenue growth are trending positive, and we remain confident in Twitter’s future.”
Twitter confirmed previous reports that the company is looking to slim down its workforce again, a year after last initiating layoffs. The headcount reduction this time will affect more than 300 workers (or 9% of the company’s global workforce) within the company’s sales, partnerships, and marketing teams. The sales division, will be reorganized from three teams – direct sales, mid-market, and small-to-medium businesses (SMB) – down to two: direct sales and SMB.
The company expects to incur cash expenditures of $10 million to $20 million as a result of the restructure, plus a $5 million to $10 million hit in noncash expenditures related to stock-based compensation.
We’re focused on driving value across three key areas of our service: audience, content & revenue. #TWTR
— TwitterIR (@TwitterIR) October 27, 2016
Here are the key numbers from Twitter’s Q3 earnings:
Q3 revenue: $616 million, up 8% year-over-year – versus $605.84 million expected by analysts.
Q3 EPS (adjusted): $0.13 – versus $0.09 expected by analysts.
Q4 revenue guidance: Twitter opted not to offer fourth-quarter revenue guidance, owing to the restructure – analysts estimated Q4 revenue of $763.47 million (though this was ahead of the reorganization announcement).
Q3 monthly active users: 317 million, up 3% year-on-year.
Q3 daily active users: Up 7% year-on-year.
Twitter announced its earnings Thursday at the unusual time of 4 a.m. Pacific Time before the market opened. Tech firms based on the West Coast usually post their results after the market closes.
The company said in press release earlier this week the rescheduling was “in response to analyst requests, to avoid overlapping with several other earnings announcements in the internet sector scheduled for Thursday afternoon.” Google and Amazon will report their earnings later on Thursday.
Twitter did not make any mention of a much-rumored sale of the company in either its earnings release or call.
But he simply concluded: “Our board is committed to maximizing long-term shareholder value. I don’t plan to comment further on this topic.”
Big-name suitors that have reportedly taken a look at buying Twitter in recent weeks included Disney, Softbank, and Salesforce. The CEO of Salesforce, Marc Benioff, said he walked away from a deal owing to Twitter’s price, work culture, and the amount of abuse on the site.
Instead, Dorsey, Twitter CFO Anthony Noto, and COO Adam Bain largely used the call to discuss how the company plans to grow and retain its user base through a combination of its video products – including the live broadcast of sporting events like NFL Thursday Night Football – and using machine learning to ensure users are always directed to the most interesting and relevant content for them.